From a risk-return perspective, AMCG believes that there are three distinct zones of mezzanine finance:

• Debt-oriented: Debt-oriented mezzanine places highest priority on preservation of principal, even to the extent that it will fully forgo potential upside in order to achieve this objective. Debt-oriented mezzanine will usually have a high degree of creditor protections, and ordinarily the debt-oriented mezzanine investor expects little or none of its return to emanate from an equity component.
• Equity-oriented: Although still focused on some degree of principal preservation, equity-oriented mezzanine seeks the highest returns by pursuing transactions in which the security issued by the investee is positioned at a very junior level in the capital structure (with significantly higher expected returns and risks). This mezzanine often requires a rate of return close to equity.
• Strategic: Strategic mezzanine refers to mezzanine positioned between “debt-oriented” and “equity-oriented” mezzanine. This is the form of mezzanine pursued by AMCG.

Types of Mezzanine Finance – Debt-Oriented, Strategic, Equity-Oriented